Third Quarter Highlights
- Diluted earnings per share of $0.39
- Net income of $31.2 million
- Return on average common equity of 13.93%
- Return on average assets of 1.22%
AKRON, Ohio, Oct. 19 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced third quarter 2006 net income of $31.2
million, or $0.39 per diluted share. This compares with $36.6 million, or
$0.44 per diluted share, for the third quarter 2005. Returns on average
common equity ("ROE") and average assets ("ROA") for the third quarter 2006
were 13.93% and 1.22%, respectively, compared with 14.90% and 1.41% for the
third quarter 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001220/FIRSTMERITLOGO )
For the first nine months of 2006, the Company reported net income of
$88.8 million, or $1.11 per diluted share, compared with $102.8 million, or
$1.22 per diluted share, for the first nine months of 2005.
Paul G. Greig, President and Chief Executive Officer, said, "Our key
priority is to improve the performance of FirstMerit's franchise. We have
revitalized our sales process and have focused on growing commercial and
small business revenue by building new client relationships and deepening
existing relationships. In the third quarter we produced meaningful balance
sheet growth, highlighted by a two percent increase in commercial loans
over the second quarter of 2006.
"Our overall results this quarter were affected by deterioration in
credit quality; this is not acceptable. We remain committed to restoring
credit quality and have taken action this quarter to address deterioration
in our commercial loan portfolio.
"FirstMerit has a strong and well-established super community banking
model with solid deposit market share and an excellent reputation for
service. We have already achieved success in leveraging that model and will
continue to do so to generate attractive returns for our shareholders."
Total revenue, defined as net interest income on a fully tax-equivalent
("FTE") basis plus noninterest income net of securities transactions,
totaled $135.2 million for the third quarter 2006, compared with $136.2
million reported in the third quarter 2005. FTE net interest income was
$85.9 million for the third quarter 2006, a decline of $2.5 million, or
2.83%, compared with the year-ago quarter. During the third quarter 2006
the net interest margin contracted 2 basis points to 3.68%, compared with
the third quarter 2005 net interest margin of 3.70%.
The net interest margin in the third quarter 2006 contracted 10 basis
points, to 3.68%, compared with the second quarter 2006, pressured by
shifting customer preference for higher yielding core deposit products as
well as reversals in non-accrual interest that reduced the net interest
margin by two basis points. The average loan portfolio increased $114.1
million, or 1.69%, compared with the prior quarter and $198.5 million, or
2.99%, compared with the third quarter 2005. During the third quarter 2006
average commercial loan growth of $71.9 million, or 2.00%, and average
installment loan growth of $66.8 million, or 4.38%, were the main drivers
of portfolio growth over the prior quarter, while average commercial loan
growth of $233.8 million, or 6.79%, drove the increase in year-over-year
quarterly loan balances.
Average deposits were $7.36 billion during the 2006 third quarter, up
$110.3 million, or 1.52%, from the same period last year. Average
certificates of deposit ("CDs") increased $290.8 million or 11.11%,
compared to the prior year quarter, as part of a mix shift in liability
funding largely due to customer preferences for higher yielding deposit
accounts. With this shift in customer preference, average demand deposit
account and average money market account balances declined a respective
$93.5 million, or 4.07%, and $86.9 million, or 3.73%, compared with the
third quarter 2005. Average investment securities decreased $404.2 million,
or 14.62%, in the third quarter 2006 compared with the third quarter 2005.
Cash flow from the maturing investment portfolio funded loan growth and was
used to pay down wholesale borrowings, stabilizing the balance sheet during
a period of eight target rate increases to federal funds by the Federal
Open Market Committee. Average wholesale borrowings and securities sold
under agreements to repurchase decreased $195.5 million, or 10.18%, in the
third quarter 2006, compared with the third quarter 2005.
Noninterest income excluding securities transactions totaled $49.3
million for the third quarter 2006, compared with $47.8 million for the
third quarter 2005, an increase of $1.5 million, or 3.12%. The primary
drivers of this increase were in credit card fees, up $0.8 million, or
7.80%, and service charges on deposits, up $0.7 million, or 3.71%, due in
part to new fee strategies. Investment services and insurance fees
increased $0.4 million, or 18.19%, and trust department income increased
$0.2 million, or 3.74%, offsetting a $0.3 million, or 16.62%, decline in
loan sales and servicing income. Other income, net of securities gains, as
a percentage of net revenue for the third quarter was 36.50% compared with
35.11% for the same quarter one year ago. Net revenue is defined as net
interest income, on a FTE basis, plus other income, less gains from
securities sales.
Other (non-interest) expenses totaled $77.0 million for the third
quarter 2006 compared with $78.9 million for the third quarter 2005, a
decrease of $1.9 million, or 2.46%. For the three months ended September
30, 2006, increases in operating costs compared to the third quarter 2005
occurred as follows: salaries, wages, pension and employee benefits rose
$1.1 million, or 2.61%, primarily due to a $0.9 million increase in
share-based compensation expense, as well as $0.7 million additional
expense associated with organizational restructurings offset by a $0.5
million reduction in incentive compensation; bankcard, loan processing and
other costs increased $1.7 million primarily attributable to volume
increases in loans outstanding and higher credit card activity;
professional services increased $2.8 million due in part to the one time
buy-out of a consulting contract at a discounted rate as part of the
Company's expense reduction initiative; other operating expense decreased
$8.0 million primarily attributable to $9.5 million of settlements of
non-income tax examinations; offset by the funding of $3.0 million to a
charitable trust with the formation of FirstMerit Foundation. The
efficiency ratio for the third quarter 2006 was 56.78%, compared with
57.81% for the third quarter 2005.
Net charge-offs totaled $11.6 million in the third quarter 2006,
compared with $10.0 million for the third quarter 2005, or 0.67% and 0.60%
of average loans, respectively. Compared with the second quarter 2006, net
charge-offs improved by $1.4 million, from 0.78%. As of September 30, 2006,
nonperforming assets were $72.5 million, or 1.05%, of period-end loans plus
other real estate, compared with $72.3 million, or 1.08%, at September 30,
2005. Nonperforming assets increased $13.7 million from June 30, 2006.
Included in the nonperforming portfolio was a $7.1 million loan which was
placed on nonaccrual during the quarter and reclassified as held for sale.
This loan is expected to be sold in the fourth quarter 2006.
The Company recorded $12.6 million of loan loss provision in the third
quarter 2006, compared with loan loss provision of $10.0 million in the
third quarter 2005.
At September 30, 2006, the allowance for loan losses was 1.28% of
period end loans, compared with 1.36% at December 31, 2005 and 1.39% at
September 30, 2005. The allowance for credit losses is the sum of the
allowance for loan losses and the reserve for unfunded lending commitments.
For comparative purposes the allowance for credit losses was 1.37% at
September 30, 2006, compared with 1.45% at December 31, 2005 and 1.48% at
September 30, 2005.
Assets at September 30, 2006, totaled $10.2 billion, down 0.70% from
$10.3 billion at September 30, 2005. Period-end loan growth of $222.1
million, or 3.32%, was driven by growth in the commercial lending portfolio
which increased $230.5 million, or 6.58%. Deposits totaled $7.4 billion at
September 30, 2006, an increase of $37.6 million, or 0.51% from September
30, 2005. Growth in CDs, up $276.8 million, or 10.28%, offset declines in
all other core deposit account balances over that time period.
Shareholders' equity was $903.4 million at September 30, 2006. The
Company's capital position remains strong as tangible equity to assets was
7.55% at quarter-end. The common dividend per share paid in the third
quarter 2006 was $0.29, a $0.01 increase from the third quarter 2005.
Third Quarter 2006
Conference Call: FirstMerit Corporation will host a conference call
today, October 19, 2006, at 2 P.M. EST.
To participate in the conference, please dial (877) 493-9121 ten
minutes before start time and provide the reservation number 7990863.
The third quarter 2006 earnings release will be available at
approximately 7:30 a.m. on the Internet at http://www.firstmerit.com under
the Investor Relations portion of the Web site. Any material non-public
information will be posted on the Web site immediately after the conference
call ends.
FirstMerit Corporation is a diversified financial services company
headquartered in Akron, Ohio, with assets of $10.2 billion as of September
30, 2006 and 162 banking offices in 24 Ohio and Western Pennsylvania
counties. FirstMerit provides a complete range of banking and other
financial services to consumers and businesses through its core operations.
Principal wholly- owned subsidiaries include: FirstMerit Bank, N.A.,
FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., FirstMerit
Credit Life Insurance Company, and FirstMerit Community Development
Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or
future trends or factors affecting the banking industry, and specifically
the financial condition and results of operations, including without
limitation, statements relating to the earnings outlook of the Company, as
well as its operations, markets and products. Actual results could differ
materially from those indicated. Among the important factors that could
cause results to differ materially are interest rate changes, continued
softening in the economy, which could materially impact credit quality
trends and the ability to generate loans, changes in the mix of the
Company's business, competitive pressures, changes in accounting, tax or
regulatory practices or requirements and those risk factors detailed in the
Company's periodic reports and registration statements filed with the
Securities and Exchange Commission. The Company undertakes no obligation to
release revisions to these forward-looking statements or reflect events or
circumstances after the date of this release.
Analysts: Tom O'Malley
(330) 384-7109
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2006 2006 2006
EARNINGS 3rd Qtr 2nd Qtr 1st Qtr
Net interest income FTE (a) $85,850 86,377 86,563
Provision for loan losses 12,612 13,159 6,106
Other income 49,341 52,078 45,397
Other expenses 76,983 85,218 81,899
FTE adjustment (a) 763 647 590
Net income 31,204 27,661 29,964
Diluted EPS 0.39 0.35 0.37
PERFORMANCE RATIOS
Return on average assets (ROA) 1.22% 1.10% 1.20%
Return on average common equity (ROE) 13.93% 12.75% 13.67%
Net interest margin FTE (a) 3.68% 3.78% 3.80%
Efficiency ratio 56.78% 61.39% 61.90%
Number of full-time equivalent
employees 2,769 2,986 3,104
MARKET DATA
Book value/common share $11.28 10.88 10.91
Period-end common share mkt value 23.17 20.94 24.66
Market as a % of book 205% 193% 226%
Cash dividends/common share $0.29 0.28 0.28
Common stock dividend payout ratio 74.36% 80.00% 75.68%
Average basic common shares 80,066 79,983 80,374
Average diluted common shares 80,262 80,203 80,648
Period end common shares 80,072 80,058 79,766
Common shares repurchased 0 1,329 2,618,588
Common stock market capitalization $1,855,268 1,676,415 1,967,030
ASSET QUALITY
Gross charge-offs $15,453 18,038 14,914
Net charge-offs 11,584 13,021 9,178
Allowance for loan losses 88,755 87,727 87,589
Reserve for unfunded lending commitments 6,307 5,716 5,853
Nonperforming assets (NPAs) 72,464 58,786 72,941
Net charge-off/average loans ratio 0.67% 0.78% 0.56%
Allowance for loan losses/period-end
loans 1.28% 1.29% 1.31%
Allowance for credit losses/period-
end loans 1.37% 1.37% 1.40%
NPAs/loans and other real estate 1.05% 0.86% 1.09%
Allowance for loan
losses/nonperforming loans 143.73% 174.80% 136.22%
Allowance for credit
losses/nonperforming loans 153.94% 186.19% 145.32%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.55% 7.20% 7.31%
Average equity to assets 8.77% 8.66% 8.79%
Average equity to loans 12.99% 12.93% 13.27%
Average loans to deposits 93.05% 90.63% 91.58%
AVERAGE BALANCES
Assets $10,138,856 10,051,623 10,111,553
Deposits 7,355,877 7,426,029 7,313,509
Loans 6,844,593 6,730,531 6,697,732
Earning assets 9,249,769 9,174,008 9,245,882
Shareholders' equity 888,841 870,234 888,818
ENDING BALANCES
Assets $10,217,968 10,254,773 10,100,717
Deposits 7,389,633 7,402,239 7,510,562
Loans 6,917,347 6,804,769 6,672,102
Goodwill 139,245 139,245 139,245
Intangible assets 3,088 3,311 3,533
Earning assets 9,344,841 9,315,062 9,193,741
Total shareholders' equity 903,383 870,698 870,552
NOTES:
(a) - Net interest income on a fully tax-equivalent ("FTE") basis
restates interest on tax-exempt securities and loans as if such
interest were subject to federal income tax at the statutory rate.
Net interest income on an FTE basis is not an accounting principle
generally accepted in the United States of America.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2005 2005
EARNINGS 4th Qtr 3rd Qtr
Net interest income FTE (a) 88,152 88,347
Provision for loan losses 16,260 9,974
Other income 47,586 47,846
Other expenses 79,274 78,926
FTE adjustment (a) 650 641
Net income 27,656 36,594
Diluted EPS 0.34 0.43
PERFORMANCE RATIOS
Return on average assets (ROA) 1.07% 1.41%
Return on average common equity (ROE) 11.52% 14.90%
Net interest margin FTE (a) 3.73% 3.70%
Efficiency ratio 58.26% 57.81%
Number of full-time equivalent
employees 3,057 3,073
MARKET DATA
Book value/common share 11.39 11.65
Period-end common share mkt value 25.91 26.79
Market as a % of book 228% 230%
Cash dividends/common share 0.28 0.28
Common stock dividend payout ratio 82.35% 65.12%
Average basic common shares 82,786 83,489
Average diluted common shares 83,082 83,978
Period end common shares 82,335 83,442
Common shares repurchased 1,228,293 178,872
Common stock market capitalization 2,133,300 2,235,411
ASSET QUALITY
Gross charge-offs 22,736 14,207
Net charge-offs 18,379 10,002
Allowance for loan losses 90,661 92,780
Reserve for unfunded lending
commitments 6,072 5,857
Nonperforming assets (NPAs) 72,257 51,398
Net charge-off/average loans ratio 1.09% 0.60%
Allowance for loan losses/period-end
loans 1.36% 1.39%
Allowance for credit losses/period-
end loans 1.45% 1.47%
NPAs/loans and other real estate 1.08% 0.77%
Allowance for loan
losses/nonperforming loans 145.61% 221.46%
Allowance for credit
losses/nonperforming loans 155.36% 235.44%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.94% 8.18%
Average equity to assets 9.33% 9.46%
Average equity to loans 14.22% 14.66%
Average loans to deposits 92.11% 91.73%
AVERAGE BALANCES
Assets 10,211,619 10,295,827
Deposits 7,273,980 7,245,562
Loans 6,699,997 6,646,112
Earning assets 9,368,139 9,465,288
Shareholders' equity 952,715 974,147
ENDING BALANCES
Assets 10,154,359 10,285,329
Deposits 7,233,650 7,352,026
Loans 6,667,327 6,685,462
Goodwill 139,245 139,245
Intangible assets 3,756 3,978
Earning assets 9,256,389 9,419,355
Total shareholders' equity 937,580 972,348
NOTES:
(a) - Net interest income on a fully tax-equivalent ("FTE") basis
restates interest on tax-exempt securities and loans as if such
interest were subject to federal income tax at the statutory rate.
Net interest income on an FTE basis is not an accounting principle
generally accepted in the United States of America.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2005,
which is derived from the September December September
audited financial statements) 30, 2006 31, 2005 30, 2005
ASSETS
Cash and due from banks $196,116 225,953 216,236
Investment securities (at fair
value) and federal funds sold 2,372,484 2,546,496 2,679,650
Loans held for sale 55,010 42,566 54,243
Loans:
Commercial loans 3,733,734 3,519,483 3,503,276
Mortgage loans 613,332 628,581 634,914
Installment loans 1,622,355 1,524,355 1,578,883
Home equity loans 748,307 778,697 765,476
Credit card loans 140,143 145,592 140,314
Leases 59,476 70,619 72,427
Total loans 6,917,347 6,667,327 6,695,290
Less allowance for loan losses (88,755) (90,661) (92,780)
Net loans 6,828,592 6,576,666 6,602,510
Premises and equipment, net 121,008 120,420 115,916
Goodwill 139,245 139,245 139,245
Intangible assets 3,088 3,756 3,980
Accrued interest receivable and
other assets 502,425 499,257 478,463
Total assets $10,217,968 10,154,359 10,290,243
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,419,002 1,523,731 1,472,471
Demand-interest bearing 784,226 830,248 878,851
Savings and money market accounts 2,216,732 2,304,177 2,307,824
Certificates and other time
deposits 2,969,673 2,575,494 2,692,880
Total deposits 7,389,633 7,233,650 7,352,026
Securities sold under agreements to
repurchase 1,269,040 1,426,037 1,465,697
Wholesale borrowings 509,129 401,104 352,250
Accrued taxes, expenses, and other
liabilities 146,783 155,988 147,922
Total liabilities 9,314,585 9,216,779 9,317,895
Commitments and contingencies
Shareholders' equity:
Preferred stock, without par value:
authorized and unissued
7,000,000 shares -- -- --
Preferred stock, Series A,
without par value:
designated 800,000 shares; none
outstanding -- -- --
Convertible preferred stock,
Series B, without par value:
designated 220,000 shares; none
outstanding -- -- --
Common stock, without par value:
authorized 300,000,000 shares;
issued 92,026,350 at
September 30, 2006, December
31, 2005 and September 30, 2005 127,937 127,937 127,937
Capital surplus 106,182 108,210 108,711
Accumulated other comprehensive loss (38,143) (42,850) (33,923)
Retained earnings 1,015,249 994,487 990,219
Treasury stock, at cost,
11,954,829, 9,691,424 and
8,584,782 shares at September
30, 2006, December 31, 2005
and September 30, 2005,
respectively (307,842) (250,204) (220,596)
Total shareholders' equity 903,383 937,580 972,348
Total liabilities and shareholders'
equity $10,217,968 10,154,359 10,290,243
The accompanying notes are an integral part of the consolidated financial
statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) September 30, June 30, March 31,
2006 2006 2006
ASSETS
Cash and due from banks $185,628 188,915 194,042
Investment securities/fed funds sold 2,360,494 2,392,208 2,500,021
Loans held for sale 44,682 51,269 48,129
Loans:
Commercial loans 3,674,988 3,603,083 3,567,263
Mortgage loans 619,542 626,476 630,702
Installment loans 1,592,917 1,526,094 1,513,938
Home equity loans 755,044 772,196 775,728
Credit card loans 139,117 137,545 141,821
Leases 62,985 65,137 68,280
Total loans 6,844,593 6,730,531 6,697,732
Less allowance for loan losses (a) 87,127 86,583 90,229
Net loans 6,757,466 6,643,948 6,607,503
Total earning assets 9,249,769 9,174,008 9,245,882
Premises and equipment, net 120,088 119,666 120,155
Accrued interest receivable and other
assets 670,498 655,617 641,703
TOTAL ASSETS $10,138,856 10,051,623 10,111,553
LIABILITIES
Deposits:
Demand-non-interest bearing $1,407,653 1,455,229 1,462,671
Demand-interest bearing 794,886 865,563 848,209
Savings and money market accounts 2,246,386 2,280,657 2,292,865
Certificates and other time
deposits 2,906,952 2,824,580 2,709,764
Total deposits 7,355,877 7,426,029 7,313,509
Securities sold under agreements to
repurchase 1,357,746 1,212,470 1,295,178
Wholesale borrowings 367,640 371,309 433,257
Total funds 9,081,263 9,009,808 9,041,944
Accrued taxes, expenses and other
liabilities (a) 168,752 171,581 180,791
Total liabilities 9,250,015 9,181,389 9,222,735
SHAREHOLDERS' EQUITY
Preferred stock - - -
Common stock 127,937 127,937 127,937
Capital surplus 105,587 104,477 108,330
Accumulated other comprehensive
(loss) income (52,601) (54,132) (44,150)
Retained earnings 1,015,749 1,001,647 998,173
Treasury stock (307,831) (309,695) (301,472)
Total shareholders' equity 888,841 870,234 888,818
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,138,856 10,051,623 10,111,553
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) December 31, September 30,
2005 2005
ASSETS
Cash and due from banks 192,189 197,412
Investment securities/fed funds sold 2,619,248 2,764,724
Loans held for sale 48,894 54,452
Loans:
Commercial loans 3,519,807 3,441,231
Mortgage loans 637,877 641,532
Installment loans 1,556,212 1,594,801
Home equity loans 772,757 754,492
Credit card loans 142,743 140,873
Leases 70,601 73,183
Total loans 6,699,997 6,646,112
Less allowance for loan losses (a) 91,916 91,852
Net loans 6,608,081 6,554,260
Total earning assets 9,368,139 9,465,288
Premises and equipment, net 117,387 117,471
Accrued interest receivable and other
assets 625,820 607,508
TOTAL ASSETS 10,211,619 10,295,827
LIABILITIES
Deposits:
Demand-non-interest bearing 1,488,679 1,457,487
Demand-interest bearing 817,009 838,549
Savings and money market accounts 2,332,528 2,333,331
Certificates and other time
deposits 2,635,764 2,616,195
Total deposits 7,273,980 7,245,562
Securities sold under agreements to
repurchase 1,443,740 1,478,857
Wholesale borrowings 375,167 442,035
Total funds 9,092,887 9,166,454
Accrued taxes, expenses and other
liabilities (a) 166,017 155,226
Total liabilities 9,258,904 9,321,680
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Capital surplus 108,303 108,564
Accumulated other comprehensive
(loss) income (39,834) (25,682)
Retained earnings 994,301 982,419
Treasury stock (237,992) (219,091)
Total shareholders' equity 952,715 974,147
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 10,211,619 10,295,827
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT
CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) September 30, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $185,628
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,993,447 20,012 3.98%
Obligations of states and political
subdivisions (tax exempt) 114,805 1,925 6.65%
Other securities and federal funds sold 252,242 3,924 6.17%
Total investment securities and
federal funds sold 2,360,494 25,861 4.35%
Loans held for sale 44,682 812 7.21%
Loans 6,844,593 129,111 7.48%
Total earning assets 9,249,769 155,784 6.68%
Allowance for loan losses (87,127)
Other assets 790,586
Total assets $10,138,856
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,407,653 -- --
Demand - interest bearing 794,886 2,241 1.12%
Savings and money market accounts 2,246,386 13,188 2.33%
Certificates and other time deposits 2,906,952 32,881 4.49%
Total deposits 7,355,877 48,310 2.61%
Securities sold under agreements to
repurchase 1,357,746 15,878 4.64%
Wholesale borrowings 367,640 5,746 6.20%
Total interest bearing liabilities 7,673,610 69,934 3.62%
Other liabilities 168,752
Shareholders' equity 888,841
Total liabilities and shareholders'
equity $10,138,856
Net yield on earning assets $9,249,769 85,850 3.68%
Interest rate spread 3.06%
Notes: Interest income on tax-exempt securities and loans have been
adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances.
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT
CORPORATION AND
SUBSIDIARIES Year ended
(Dollars in thousands) December 31, 2005
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks 194,485
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,416,360 91,814 3.80%
Obligations of states and political
subdivisions (tax exempt) 99,487 6,707 6.74%
Other securities and federal funds
sold 255,568 12,291 4.81%
Total investment securities and
federal funds sold 2,771,415 110,812 4.00%
Loans held for sale 52,740 2,854 5.41%
Loans 6,610,509 430,402 6.51%
Total earning assets 9,434,664 544,068 5.77%
Allowance for loan losses (94,118)
Other assets 729,398
Total assets 10,264,429
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,466,106 -- --
Demand - interest bearing 827,829 5,871 0.71%
Savings and money market accounts 2,356,813 32,944 1.40%
Certificates and other time deposits 2,647,908 86,764 3.28%
Total deposits 7,298,656 125,579 1.72%
Securities sold under agreements to
repurchase 1,409,135 45,423 3.22%
Wholesale borrowings 431,787 21,449 4.97%
Total interest bearing liabilities 7,673,472 192,451 2.51%
Other liabilities 158,125
Shareholders' equity 966,726
Total liabilities and shareholders'
equity 10,264,429
Net yield on earning assets 9,434,664 351,617 3.73%
Interest rate spread 3.26%
Notes: Interest income on tax-exempt securities and loans have been
adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances.
FIRSTMERIT
CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) September 30, 2005
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks 197,412
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,408,219 22,621 3.73%
Obligations of states and political
subdivisions (tax exempt) 99,273 1,638 6.55%
Other securities and federal funds
sold 257,232 3,056 4.71%
Total investment securities and
federal funds sold 2,764,724 27,315 3.92%
Loans held for sale 54,452 660 4.81%
Loans 6,646,112 110,535 6.60%
Total earning assets 9,465,288 138,510 5.81%
Allowance for loan losses (91,852)
Other assets 724,979
Total assets 10,295,827
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,457,487 -- --
Demand - interest bearing 838,549 1,732 0.82%
Savings and money market accounts 2,333,331 8,700 1.48%
Certificates and other time deposits 2,616,195 21,637 3.28%
Total deposits 7,245,562 32,069 1.76%
Securities sold under agreements to
repurchase 1,478,857 12,535 3.36%
Wholesale borrowings 442,035 5,559 4.99%
Total interest bearing liabilities 7,708,967 50,163 2.58%
Other liabilities 155,226
Shareholders' equity 974,147
Total liabilities and shareholders'
equity 10,295,827
Net yield on earning assets 9,465,288 88,347 3.70%
Interest rate spread 3.22%
Notes: Interest income on tax-exempt securities and loans have been
adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Quarters Nine months
(Unaudited) ended ended
(In thousands except per share data) September 30, September 30,
2006 2005 2006 2005
Interest income:
Interest and fees on loans,
including held for sale $129,890 111,169 371,080 317,293
Interest and dividends on
investment securities and federal
funds sold 25,131 26,700 75,283 82,194
Total interest income 155,021 137,869 446,363 399,487
Interest expense:
Interest on deposits:
Demand-interest bearing 2,241 1,732 7,186 3,918
Savings and money market accounts 13,188 8,700 36,015 22,592
Certificates and other time
deposits 32,881 21,637 88,308 62,933
Interest on securities sold under
agreements to repurchase 15,878 12,535 40,758 32,000
Interest on wholesale borrowings 5,746 5,559 17,306 16,551
Total interest expense 69,934 50,163 189,573 137,994
Net interest income 85,087 87,706 256,790 261,493
Provision for loan losses 12,612 9,974 31,877 27,560
Net interest income after
provision for loan losses 72,475 77,732 224,913 233,933
Other income:
Trust department income 5,721 5,515 16,859 16,704
Service charges on deposits 19,250 18,561 53,326 51,181
Credit card fees 11,251 10,437 33,400 30,371
ATM and other service fees 3,301 3,453 9,682 9,710
Bank owned life insurance income 3,042 3,074 11,338 9,172
Investment services and insurance 2,631 2,226 7,809 7,912
Investment securities gains, net 2 40 22 1,887
Loan sales and servicing income 1,731 2,076 6,009 4,729
Other operating income 2,412 2,464 8,371 11,214
Total other income 49,341 47,846 146,816 142,880
Other expenses:
Salaries, wages, pension and
employee benefits 43,248 42,149 133,000 122,893
Net occupancy expense 6,002 5,567 18,671 17,984
Equipment expense 3,097 2,962 8,969 9,149
Stationery, supplies and postage 2,423 2,559 7,279 7,504
Bankcard, loan processing and other
costs 7,459 5,802 20,703 16,970
Professional services 5,470 2,632 11,971 8,625
Amortization of intangibles 222 222 667 667
Other operating expense 9,062 17,033 42,840 50,442
Total other expenses 76,983 78,926 244,100 234,234
Income before federal income
tax expense 44,833 46,652 127,629 142,579
Federal income tax expense 13,629 10,058 38,800 39,752
Net income $31,204 36,594 88,829 102,827
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding gain
(loss), net of taxes 23,868 (14,541) 5,468 (19,156)
Unrealized hedging gain (loss), net
of taxes 3 295 (747) 851
Minimum pension liability
adjustment, net of taxes - - - (183)
Less: reclassification adjustment
for securities' gains losses
realized in net income,
net of taxes 1 26 14 1,227
Total other comprehensive income
(loss), net of taxes 23,870 (14,272) 4,707 (19,715)
Comprehensive income $55,074 22,322 93,536 83,112
Net income applicable to common
shares $31,204 36,594 88,829 102,827
Net income used in diluted EPS
calculation $31,209 36,601 88,844 102,848
Weighted average number of common
shares outstanding - basic 80,066 83,489 80,140 83,727
Weighted average number of common
shares outstanding - diluted 80,262 83,978 80,365 84,105
Basic earnings per share $0.39 0.44 1.11 1.23
Diluted earnings per share $0.39 0.43 1.11 1.22
Dividend per share $0.29 0.28 0.85 0.82
The accompanying notes are an integral part of the consolidated financial
statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---
LINKED QUARTERS
(Unaudited) Quarterly Results
(Dollars in thousands,
except share data) 2006 2006 2006 2005 2005
3rd Q 2nd Q 1st Q 4th Q 3rd Q
Interest and fees on
loans, including held for
sale $129,890 123,450 117,740 115,850 111,169
Interest and dividends -
securities and federal
funds sold 25,131 24,820 25,332 26,109 26,700
Total interest income 155,021 148,270 143,072 141,959 137,869
Interest on deposits:
Demand-interest bearing 2,241 2,583 2,362 1,953 1,732
Savings and money market
accounts 13,188 12,079 10,748 10,352 8,700
Certificates and other
time deposits 32,881 29,326 26,101 23,831 21,637
Securities sold under
agreements to
repurchase 15,878 12,957 11,923 13,423 12,535
Wholesale borrowings 5,746 5,595 5,965 4,898 5,559
Total interest expense 69,934 62,540 57,099 54,457 50,163
Net interest income 85,087 85,730 85,973 87,502 87,706
Provision for loan losses 12,612 13,159 6,106 16,260 9,974
Net interest income
after provision for
loan losses 72,475 72,571 79,867 71,242 77,732
Other income:
Trust department income 5,721 5,744 5,394 5,430 5,515
Service charges on
deposits 19,250 18,010 16,066 17,884 18,561
Credit card fees 11,251 11,478 10,671 10,601 10,437
ATM and other service fees 3,301 3,273 3,108 3,157 3,453
Bank owned life insurance
income 3,042 5,310 2,986 3,092 3,074
Investment services and
insurance 2,631 2,581 2,597 2,696 2,226
Investment securities
gains (losses), net 2 4 16 39 40
Loan sales and servicing
income 1,731 2,833 1,445 1,668 2,076
Other operating income 2,412 2,845 3,114 3,019 2,464
Total other income 49,341 52,078 45,397 47,586 47,846
Other expenses:
Salaries, wages, pension
and employee benefits 43,248 46,721 43,031 40,790 42,149
Net occupancy expense 6,002 6,120 6,549 5,746 5,567
Equipment expense 3,097 2,914 2,958 4,152 2,962
Stationery, supplies and
postage 2,423 2,403 2,453 2,546 2,559
Bankcard, loan processing
and other costs 7,459 7,417 5,827 7,042 5,802
Professional services 5,470 3,738 2,763 3,389 2,632
Amortization of
intangibles 222 222 223 222 222
Other operating expense 9,062 15,683 18,095 15,387 17,033
Total other expenses 76,983 85,218 81,899 79,274 78,926
Income before income tax
expense 44,833 39,431 43,365 39,554 46,652
Federal income taxes 13,629 11,770 13,401 11,898 10,058
Net income $31,204 27,661 29,964 27,656 36,594
Other comprehensive income
(loss), net of taxes 23,870 (8,618) (10,545) (8,927) (14,272)
Comprehensive income $55,074 19,043 19,419 18,729 22,322
Net income applicable to
common shares 31,204 27,661 29,964 27,656 36,594
Adjusted net income used in
diluted EPS calculation 31,209 27,666 29,969 27,659 36,601
Weighted-average common
shares - basic 80,066 79,983 80,374 82,786 83,489
Weighted-average common
shares - diluted 80,262 80,203 80,648 83,082 83,978
Basic net income per share $0.39 0.35 0.37 0.33 0.44
Diluted net income per share $0.39 0.35 0.37 0.34 0.43
Note: Certain prior year balances have been reclassified to conform to
the current year presentation.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2005 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Periods
Allowance for Credit Sep 30 June 30 Mar 31
Losses 2006 2006 2006
Allowance for loan losses, beginning
of period $87,727 87,589 90,661
Allowance related to loans sold - - -
Provision for loan losses 12,612 13,159 6,106
Charge-offs 15,453 18,038 14,914
Recoveries 3,869 5,017 5,736
Net charge-offs 11,584 13,021 9,178
Allowance for loan losses, end of
period $88,755 87,727 87,589
Reserve for unfunded lending
commitments, beginning of period $5,716 5,853 6,072
Provision for credit losses 591 (137) (219)
Reserve for unfunded lending
commitments, end of period $6,307 5,716 5,853
Allowance for Credit Losses $95,062 93,443 93,442
Ratios
Provision for loan losses as a % of
average loans 0.73% 0.78% 0.37%
Provision for credit losses as a % of
average loans 0.03% -0.01% -0.01%
Net charge-offs as a % of average
loans 0.67% 0.78% 0.56%
Allowance for loan losses as a % of
period-end loans 1.28% 1.29% 1.31%
Allowance for credit losses as a % of
period-end loans 1.37% 1.37% 1.40%
Allowance for loan losses as a % of
nonperforming loans 143.73% 174.80% 136.22%
Allowance for credit losses as a % of
nonperforming loans 153.94% 186.19% 145.32%
Asset Quality
Impaired loans:
Nonaccrual $52,621 41,927 56,258
Other nonperforming loans:
Nonaccrual 9,132 8,261 8,044
Total nonperforming loans 61,753 50,188 64,302
Other real estate ("ORE") 10,711 8,598 8,639
Total nonperforming assets ("NPAs") $72,464 58,786 72,941
NPAs as % of period-end loans + ORE 1.05% 0.86% 1.09%
Past due 90 days or more & accruing
interest $15,311 16,483 18,640
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2005 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Annual
Quarterly Periods Period
Dec 31 Sep 30 Dec 31
Allowance for Credit Losses 2005 2005 2005
Allowance for loan losses, beginning
of period 92,780 92,808 97,296
Allowance related to loans sold - - -
Provision for loan losses 16,260 9,974 43,820
Charge-offs 22,736 14,207 69,105
Recoveries 4,357 4,205 18,650
Net charge-offs 18,379 10,002 50,455
Allowance for loan losses, end of
period 90,661 92,780 90,661
Reserve for unfunded lending
commitments, beginning of period 5,857 5,785 5,774
Provision for credit losses 215 72 298
Reserve for unfunded lending
commitments, end of period 6,072 5,857 6,072
Allowance for Credit Losses 96,733 98,637 96,733
Ratios
Provision for loan losses as a % of
average loans 0.96% 0.60% 0.66%
Provision for credit losses as a % of
average loans 0.01% 0.00% 0.00%
Net charge-offs as a % of average
loans 1.09% 0.60% 0.76%
Allowance for loan losses as a % of
period-end loans 1.36% 1.39% 1.36%
Allowance for credit losses as a % of
period-end loans 1.45% 1.48% 1.45%
Allowance for loan losses as a % of
nonperforming loans 145.61% 221.46% 145.61%
Allowance for credit losses as a % of
nonperforming loans 155.36% 235.44% 155.36%
Asset Quality
Impaired loans:
Nonaccrual 54,176 34,144 54,176
Other nonperforming loans:
Nonaccrual 8,086 7,751 8,086
Total nonperforming loans 62,262 41,895 62,262
Other real estate ("ORE") 9,995 9,503 9,995
Total nonperforming assets ("NPAs") 72,257 51,398 72,257
NPAs as % of period-end loans + ORE 1.08% 0.77% 1.08%
Past due 90 days or more & accruing
interest 17,931 21,451 17,931
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2006 2006 2006 2005 2005
QUARTERLY OTHER INCOME DETAIL 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Trust department income $5,721 5,744 5,394 5,430 5,515
Service charges on deposits 19,250 18,010 16,066 17,884 18,561
Credit card fees 11,251 11,478 10,671 10,601 10,437
ATM and other service fees 3,301 3,273 3,108 3,157 3,453
Bank owned life insurance income 3,042 5,310 2,986 3,092 3,074
Investment services and insurance 2,631 2,581 2,597 2,696 2,226
Investment securities gains
(losses), net 2 4 16 39 40
Loan sales and servicing income 1,731 2,833 1,445 1,668 2,076
Other operating income 2,412 2,845 3,114 3,019 2,464
Total Other Income $49,341 52,078 45,397 47,586 47,846
2006 2006 2006 2005 2005
QUARTERLY OTHER EXPENSES DETAIL 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Salaries, wages, pension and
employee benefits $43,248 46,721 43,031 40,790 42,149
Net occupancy expense 6,002 6,120 6,549 5,746 5,567
Equipment expense 3,097 2,914 2,958 4,152 2,962
Taxes, other than federal income
taxes (7,703) 1,802 1,819 1,578 849
Stationery, supplies and postage 2,423 2,403 2,453 2,546 2,559
Bankcard, loan processing and
other costs 7,459 7,417 5,827 7,042 5,802
Advertising 1,152 2,369 2,766 1,415 1,863
Professional services 5,470 3,738 2,763 3,389 2,632
Telephone 1,138 1,094 1,128 1,136 1,206
Amortization of intangibles 222 222 223 222 222
Other operating expense 14,475 10,418 12,382 11,258 13,115
Total Other Expenses $76,983 85,218 81,899 79,274 78,926
Note: Certain prior year balances have been reclassified to conform to
the current year presentation.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Allowance for loan losses -
beginning of period $87,727 92,808 90,661 97,296
Loans charged off:
Commercial 6,731 2,805 22,883 11,458
Mortgage 459 400 1,157 1,082
Installment 4,832 6,187 15,386 20,244
Home equity 1,112 1,918 2,878 3,241
Credit cards 2,315 2,652 6,040 7,734
Leases 4 245 61 2,610
Total 15,453 14,207 48,405 46,369
Recoveries:
Commercial 566 698 2,948 2,910
Mortgage 9 70 95 177
Installment 2,219 2,312 8,330 7,617
Home equity 333 317 1,018 928
Credit cards 585 549 1,619 1,859
Manufactured housing 102 153 372 507
Leases 55 106 240 295
Total 3,869 4,205 14,622 14,293
Net charge-offs 11,584 10,002 33,783 32,076
Provision for loan losses 12,612 9,974 31,877 27,560
Allowance for loan losses -
end of period $88,755 92,780 88,755 92,780
Average loans outstanding $6,844,593 6,646,112 6,758,157 6,580,351
Ratio to average loans:
(Annualized) net charge-
offs 0.67% 0.60% 0.67% 0.65%
Provision for loan losses 0.73% 0.60% 0.63% 0.56%
Loans outstanding -
period-end $6,917,347 6,695,290 6,917,347 6,695,290
Allowance for credit losses: 95,062 98,637 95,062 98,637
As a multiple of
(annualized) net charge-
offs 2.07 2.49 2.10 2.30
Allowance for loan losses:
As a percent of period-
end loans outstanding 1.28% 1.39% 1.28% 1.39%
As a multiple of
(annualized) net charge-
offs 1.93 2.34 1.97 2.16
SOURCE FirstMerit Corporation
back to top
